PANAMA' S VIEWPOINT OF THE REVOLUTION OF 1903

AND

THE INTERRELATIOO' OF THE PANAMA CANAL JITH PANAMA ' S DEVELOP100IT i

PA. •s VIEWPOil.YT OF TnE REVOLtrfI

D

By

ROBERT A. BRIG II llachcl.or of Arts Oklahoma. A & U College illmter, Okl.aho 1935

Subr:tl.tted to the Dopartrmnt of Eistory

Oklaho1:1a At.,"l"icultural and { chanieal College

In Partial FuU'il.lnent of tho Roquiremcnts

For the Dozree of

MASTER OF TS 1946 ii OKLAHffMA !61ICULTURAL &MECHAN1CAL COL LIBRARY JUN 24 1947

APPROVED BY:

c;:-lii·hairm~ ~ esi ~~olDIDittee

c;;-:d{QHead of thebetment~

" ill

PREFACE

The construction of a canal across the Isthmus of Panama ha.s been

a subject for co.tl'lersation for the past four hundred years. It 111as

first knovm by the µ-elates of Spain that a canal across the Isthmus of Panama v.ould be like a Deba,jo ~ llave to the King of Spain.J Bolivar~ the great emancipator of Colombia., assez:ted that a canal Fould soim day

be built across the Isthnru.s of Pana.ma .. Several leading nations have

considered the possibility of building a canal across the Isthmus:

England, France and the United States. England never attempted it; . .,,y France tried, but finally gave it up as an impossi ble undertaking.

I3-storians have written_ int(_? t!ieir _!rl.s_!.9ries ~~a~h~ United States.,

under Theod_s>!:_e Roosevelt, merel_y_ took_their navy and went do,m and took

P~ama aw from Colombia. Historians fail to show that according to the

Treaty of 1846., bet\7een }Jew Granada and the United States, Colombia had

given the United States the right to construct, maintain and protect

any type of transportation across the Isthmus of Pana.ma. The men of

history fail to re..11.ize that the Panamanian people vrere interested in

breakir\g away from Colonbia., as shown in the Revolution of 1903. It is

not commonly knmm in histories that the Panamanian people ki1ew that if

the Canal failed because of Colombia' s stupidity in her diplomatic re-

lations in securing aid in building the Canal that all that Panama ever

hoped to be economically, socially and politically v;ould be destroyed./

To compile all the treaties and letters from 1846 to the Panama-

nian Revolution of 19Q3 that referred to a canal across the Isthmus of

anama., '®uld be too great for a thesis. The essence of all thea treat- , I t ~ I } •t.; I ~ L' (, i . ~ , ' I ~ ..> •.) ,, . . I ies and letters ms, ho\' ever, for Colombia to find some nation who was .willing to build the Canal and then tum over the management to Colombia. iv

It is., then, the purpose of this treatise to show that the desire f or independence came from within Panama and not from rvithout, and that

Colombia. failed to accomplish 1hat she started out to do, nanely., to build a canal a.cross the Isthmus . Colombia .failed because she asked too much. Panama could see the failure. Pana.ma also knew that Colombia. had taxed her heavily and had not put anything back into Panalli:1. such as roads., schools, or any other type of internal improvemait. Panama knew that she v1as not represented in the government of Colombia sufficiently to overcame this handicap. Panama I s only answer as to break vdth Col­ ombia.

The building of the Pana.ma. Canal has saved the w-orld millions of miles of dangerous and unnecessary travel.. The Canal has become the crossroad of international commerce.

Panama. has gained by leaps and bounds in internal improvement and economic stability as shovm in this thesis. The Panama Canal has been an aid to civilization. Because of t he nearness of the Canal to Col­ ombia., Colombia has gained nmch more than she could have ever expected from Panama ithout the Ca.ruil. y'

The author of this thesis is especially indebted to those who have so ably assisted him in giving helpful criticisms in the prere.ration of this work.

R. A. B. V

TABLE OF CONTE!JTS

Chapter I

A Diplomatic Hi.story of the Isthmus of Panama through the Organization of the Republic•••••••••••••••••••••• 1

Chapter II Panama's Reception into the World of Nations ••••••••••••••••• 14

Chapter III An Interpretation of United States Intervention in the Revolt., and the Values Derived Thereby•••••••••••••••• 18

Chapter IV

The Treaty of 1903 ...... 27

Chapter V r>anama in lJorld t'ka.r II ...... ~ • • • • • • • • .. • • • • • • .. • • • . • .. • . • 33

Bibliograpey ...... · . . . . • . . • . 51 A DIPLOMATIC HISTORY OF THE IST!Th'US OF PANAMA THROUGH THE ORGANIZATION OF 11HE REPUBLIC

Chapter I

On November 6, 190.3, late at night, the ess reeeivod a communi- cation from the lhite House which justified the recognition of the newly created Republic of Panama. The historic document said:

The proceedings of the President in the Panama matter ,ere not only in accord with the principles of justice and equity, in line with all major precedents of our public policy, but were the only course which could be taken in the fulfillment of our rights and obligations of the treaty with Pana.ma. Through our treaty made with New Granada (Colombia) in the year of 1846, New Granada guaranteed the right of transit across the Isthnrus of Pana.ma..

This right, acquired by treaty, 1'l'as not conceded freely but in exchange for irn..oortant compensation. The government of the United States guaranteed positively and efficaciously the stipulation of perfect ~utrality of the Isth.'ilUs w:i.. th a viev to free transit from one ocean to another, which m y not be inteITUpted or ~rassed at any time while this treaty lasts.1

In substance, the United States guaranteed to Panama the same rights of sovereignty and propriety which New Granada possessed over the Isthmus t erritory, and close relations were created between the two goverrurents, relations well establiohed by President Theodore Roosevelt in a message to the Senate, in which he said, The importance of the concession for the commercial and politi­ cal interests of the United States could not be appreciated. The Panama route is the shortest betlveen the two oceans. It is a most practicable location for a railroad or canal, and considerable advantage will result for our trade and communications, not only with the West Coast of America, but also vdth Asia and the Pacific Islands, because such a route saves· the United States the long and dangerous navigation of more than 9, 000 miles through Cape Horn. By the treaty,. , e do not propose to guarantee the territory of a foreign nation iith ,vhl.eh the United States does not have common

1 Castillero, History of Inter-Oceanic Communications ~ of i ts Influence !lli! of ~ Development £! Panama Nationality, pp. 151. 2

interests; but on the other hand we are more interested in the guarantee o:f New Granada than of any other nation. These consid­ erations of effective control have come to be more important each year since the time of the treaty. The acquisition of Hawaii and the Philippines has given an even higher value to the control of trade and traffic in all the ci villzed world and tranquil transit through the Isthmus has become highly important to the United States. The right to this control has never made us lax, nor caused us to lose sight of the re-vindication of our rights or the exercise of our obligation.

Secretary Everest, in 1853, assured the Minister of Peru that,

11The Treaty confirms that we shall not vacillate in maintaining the neutrality of the Isthmus in case of war between Peru and Colombia . " In 1866, Colombia, which had always been vigilant in profiting by the privileges granted in the Treaty, expressed its hopes that in case of war between Spain and Peru, the United St ates would put into effect the guarantee of its neutrality.

In 1871 Fish said that the Department of State had !owidations for believing that by advertence the United States had on various occ- asions av ided an attack on the sovereignty of Colombia through the

Isthmus. 2

In 1896 Colombia was menaced by Italy in the outbreak of hostilities caused by the Cerruti Claims. Italy had manifested serious interests, which the United States could not permit, against a sister republic of this hemisphere; and the United States protected Colombia's sover- eignty as the government of a port of which the Treaty guarantees free- dom. The United States has not o~ constantly protected Col.ombia from foreign invasions, in its efforts to carry out the Treaty obligations, but had intervened at other times to avoid obstruction of traffic during the periods of domestic dissension. In these cases we intervened in

2 ~ - , 315 3 view of the necessities of the moment, but always to the benefit of

Colombi as well as international trade. The position of the United

States was clearly expressed by ~&rd. in these words:

The United States has not ta.ken, nor will talce, any part in the question of internal revolutions in the State of Panama nor in Colombia, but will maintain perfect neutrality in such domestic controversies; moreover, the United States goes on record for pro­ tecting trade through the Isthmus against invasions, either domestic or foreign, rhich would disturb the peace f Panama . There has never existed any doubt that the Treaty of 1846 guarantees free transit either for the citizens or for the government of the United States. We used the Isthmus for the transit of troops and for apprehension

of fugitives of justice; and in the protocol signed in Bogota, February 22, 1879, this right of transit for troops and the extradition or criminals remained, a right hich we retained as compensation for guaranteeing the sovereignty and property of the Isthmus. It should not be overlooked that this treaty was not dependent for its efficacy

on the individual signatories in the name of the territory affected.

The Treaty is a contract, jurists declare, that includes the land 3 itself.

New Granada continues to exist, its territory divided, but the solemn promise which forced the possessors of tl-ie Isthmus to maintain its open transit to the United St ates remained in full force. That the government of the United States is risolved to exercise this privilege is too clear for discussion. In a letter to the u. S. Secretary of State from Mariano Ospina, Minister of Foreign Affairs of New Granada, on September 30, 1843;

3 Ibid., 156

4 Ibid., 157 4 he said:

The government of New Granada, desiring to afford to the com­ merce of nations the advantages hich would result from a communi­ cation between the Atlantic and Pacific, across the Isthmus of Pana­ ma, has resolved to invite the governments of the principal mari­ time nations to conclude a treaty, with the object of carrying this great undertaking into execution; as well that the governments should take upon themselves the execution of the work, as that they should guarantee the neutrality of the conmunioation between the seas, and the fulfillment of the conditions stipulated for its execution. Full powers have been in consequence, given to Senor Manuel Maria squera, Charged' Affaires of the republic near the government of her Britannic Majesty, to treat with the plenipotentiaries who may be appointed to that effect. As the government of the United States is one of those mich the government of New Granada desires to see participate in the treaty in question, I have received orders from my goven1ment to make you acquainted with the same, in order that, if the government of the United States should judge proper to join its efforts for the consummation of the important work of opening the communication between the two oceans, it may authorize so.me person to take part in the negotiation proposed.

I shall avail myself of this opportunity to represent to you, sir, the assurances of the high consideration and distinguished respect with which l have the honor to subscribe myself your most obedient and attentive servant, aria.no Ospina. 5 The Colombian government repeatedly negotiated for a treaty between

Panama. and the United States, for carrying into effect the plans of a canal through the Isthmus; and ownership and control by the United States was not a new proposition; a plan agreed to by both countries which affinned this right had long been conceded by Colombia . The universal conviction was that the moment had arri.ved in which to real- ize the giant plan. It was too great for individual enterprise and could only be carried out by a great power with vast resources. The only government which could undertake this stupendous labor was the

5 Mariano Ospina, "Letter from nister of Foreign Affairs of New Granada. to the U. S Secretary of State, Volume 7, Senate Documents, 339, 1845-1846, Serial Docwnent 476, Bogota, Colombia, September 30, 1843 5

United States.

The President, by authorization of Congress, was satisfied to nego­ tiate the Treaty with the government of Bogota for the construction of the Canal through the Isthmus, and the government of the United States offered a number of special considerations to Colombia. The Treaty contained extraordinarily liberal provisions; it declared gratuities for the privilege of constructing a Canal, and a generous annual payment. dded to all this innumerable benefits would be derived by the Colombian people for the construction of this colussus through its territory.

The Treaty was promptly ratified by the United States Senate, b,1 t was rejected by Colombia. The insinuations made by Bogota to this govern­ ment for failure to renew negotiations have been too vague to merit serious consideration by the United States. re important to this study, they were such as to produce suspicion in anama that there was no reasonable hope for the realization of the object on which the United

States had fixed its eyes for years. And the rejection of the Treaty convinced the Panamanians there remained nothing m;>re to be expected from r elations with the Colombian government. They dedicated themselves to revolt. When France abandoned construction of the Panama Canal, and Colombia refused to negotiate further wit h the United States in the interests of its construction, the people of Panama began to see the unconsulted will of the national representation as the death of progress, particularly so with relation to their loss of the illusion of coming econo~c pr6sperity 6 since the Canal would have been without profit once the works were dere- . 6 licted. The Department of Panama, .with.out industry and without riches, found itself in a most lamentable state of decadence and economic prostration. Panama had no other hope of immediate livelihood, without the renewal of work on the Canal, whereas its completion would have encouraged inter- national conmerce on a large scale, and was the only hope for economic development . This potential loss , united with the traditional tendency of the Isthmus toward an autonomous life, awakened all the donr.ant aspir- ations of independence, and Panamanians concluded that the moment had come to destroy the ties linking it with Colombia for the past century. 7

Finally, after defeat in the Colombian Senate of the Hay- Herran Treaty, one- hundred or more revolutionaries of the Panama capital decided the hour for revolt had arrived. They assumed direction of the revolutionary movement, and thanks to the efficient and resourceful operation of a Panamanian commission in the United 5tates, receiveq arms and military aid from North America. The i ndependence of Panama was declared, and the conspirators associated themselves in the cause of liberty with all those persons who, through their position, were considered necessary elements for beginning the revolution. Even the Chief of the Colombian battalion sent to quench the revolt was won over to the cause of Panama. On November 3, 1903, the date of the secessionist revolution, the capital of the Isthmus was instituted. On November 4, the Act of lnde- pendence was celebrated and approved by the Munic ' pal Council, the new

6 Castillero, 2.E.• cit. , 117 7 Castillero, Loe . cit. 7 functionaries of the country, and the people, after which a provisional government was named . The cities ratified the ancipation and the continuation of the new government which had been initiated by such a relatively small group of conspirators. A record of the reasons for 8 revolt was drawn up and presented to the country:

Today ' s important act through ~hich a spontaneous revolt was executed by the people of the Isthmus, was the i nevitable consequence of a situation which has been aggravated year after year. The long period of abuse which our citizens suff ered under Colombia is concluded. The evils should have been supported by resignation in altars of concord and by national union. If reparations had been possible, and if we had been able to hold fundamental hopes of betterment and effective pr ogress under a system which had been submitted to us by that Republic, this step perhaps would not have been necessary.

e solemnly declare that we have a sincere, profound conviction t hat all hope was vain-~all sacrifice on our part useless.

The Isthmus of Panama was governed by the Republic of Colombia by the strict criteria ihich, in epochs already remote, applied to the colonies of European nations; the people and the Isthmian territory were a financial resource and nothing more. The contracts and nego­ tiations on railroads, the Panama Canal and the Isthmus in general have produced great sums . These we have not enumerated in order not to appear in this writing~ destined to posterity~-as motivated by commercial spirit. Of these great sums the Isthmus has not received the benefits, either for its numerous rivers, or the construction of roads between its populations, of public office or colleges. Nor has there een any interest in encouraging industry, nor has Panama enjoyed in the smallest part a return for our sources of income which might be employed in stimulating prosperity. 9 A very recent ex.ample of what great deeds might have b en per­ mitted us is clear in the business of the Panama Canal, as consider d by the Colombian Congress. This body declared its adverse opinion, founded on the assumption that only the I sthmus of Panama •iould be favored by an opening of the passage~by virtue of a treaty with the United States--and that th rest of Colombia would not receive direct benefits of any kind from that work . The Congress even justified

S .flli. , 120 9 Castillero, loc. cit. 8

the irreparable damage which it caused the Isthmus, and in effect closed the door to future negotiations. 10 * The Isthmian people, in view of such notorious causes, have decided to recover their sovereignty, entering formally into the society of free and independent nations in order to rk for' its own fortunes and assure the future in a v s "ole manner, attempting the role of an independent power through the country's immense re­ sources. We aspire to the foundation of a true Republic in which tolerance rules_. in which the norms may be invariable for the govem­ ment and the governed, in which shall exist effective peace, which consists in free and harmonious interplay of interests for all, and in which, in sum, there will be a perpetual base for eivili~ation and progress. l

In init iating the life of an ind pendent nation, we understand the responsibilities which this state implies, but we have profound faith in the prudence and patriotism of the people of this Isthmus, and we possess sufficient energi s for creating a secure future without danger of accident. , We separate ourselves from our sister Colombia ithout rancor and with happiness. as a son who separates from the patemal hearth. The people of the Isthmus will adopt the life which t hey have sel­ ect

We are, then, to belong among the free nations of the world, considering Colombia as a sister nation, with whom we will always be such s the circumstances demand, and for i·hose prosperity we have the most fervent vows . 13

The govern.~ent of the United States was notified through its con- sula.r representativ in Panama, and through Panama ' s agent of the Revol- ution, in lashington, of the creation of the Panama Republic, by whose means the United States saw itself assured the control over the Canal which the Colombian Senate had refused. And the Panamanians, by the

lO The author of this translation finds that between 1850 and 1880 Colombia collected some 17,244,000 from the Isthmus without returning any of this sum. * Castillero, 2£• cit. , 122 11 Ibid. , 123

l2 J.E!9, .. , 124 13 Castillero, 12£. cit. 9 happy outcome of the revolution, saw on their part the accomplishment of their desire that the Canal be constructed through their territory by means or a treaty with the nation most interested and able to consummate the task. t ith considerable vision and intelligence Dr. Carlos Martinez

Silva, dnister of Colombia in Washington, and originator_of the Hay-

Herran Treaty, pointed to its importance two years in advance of the re- volt:

In studying the ~uestion of the Canal, the government of Bogota should truce into account the special interests in Panama. For these the Canal is a matter of life or death, because Panama subsists almost exclusively on the conunerce of transit; if the Canal should be opened by th other (Nicaraguan) route, the crisis would be inmediate, and would bring almost certain ruin for the trade and even for urban properties. It would mean abandonment of all rural properties in the immediate zone of the city. Even the railroads would lose a great part of their actual importance. The emigration of' all commercial houses, and all of those who live by industries related to transport­ ation, would be inevitable. So great a disaster would indicate complete annullment of national income in the Isthmus; administration and government would be a pennanent evil and a heavy burden on the treasury of the Republic . I am sure there would not be a single inhabitant of I ana.'Ila viho will not consider a grave misfortune the loss of all hope of what the Canal could be. It is possible that Colombia ould look upon this with indifference; but it would be the last degree of cruelty and of unnecessary sacrifice of all the interests of a department. Interests so sacred and valuable, which represent the fui}!1'e of an entire people, cannot be material for political play.

The step taken by Panama, if grief to the secular ties which joined the Isthmus to Colombia, as obedient to an urgent necessity. Affairs had begun to press clearly for a Nicaraguan route, thich terminated iu a reasonable concession in the Spooner la through which the President obtained the privileg of a Panama Canal, and, according to the terms of the same legal disposition, time was already inclining toward the

14 Dr. Carlos 'artinez Silva, • emorandum ('.',ashington, D. C. , 1901)., Castillero, 2£• cit. , 126 10

Central American way. l5

Fortucately, President Theodore Roosevelt, a decided partisan of the Panama route, resisted adverse pressure and prudently took advan-

tage of the delay for study of the important problems of inter-oceanic

communication. V: ithout being certain of what the near future held for

satisfying his cherished ideal of completion of the Isthmus Cana~in October 10, 1903, he wrote the follo 1ng:

rivately, I can say to you that I would be happy if Panaaa. were an independent state, or if at this moment it were in-dependent; but to say this publicly would be as much as6instigating a revolution, and the same will happen by not saying it. l:.

To the Panama. people, whose vital interests ~ere disdained in the

Colombian Senate of 1903, there remained no other road than to asswne

sovereignty of the territory. The illustrious inte-rna.tionallst, Dr.

Justo Ar.as , said:

Th• wse ot sovere18nt7 and of the popular will is a. natural :right, 1.f in using it one secures t he well being of the country. Far from committing a crime, it is exercising an act of virtue, the v1rtue1,r patriotism because the .fatherland i s essentially the native l and. Humbolt, the famous German explorer, virtually forecast the revolt

a century ago: 'l abstain from discussing the possibility that the land

of Pa ama should form a republic a.part under the name of' Junciana'

(Union), dependent on the United States. " 18 And Dr . Francisco oto, nister of Finance of General Santander,

had prophesied:

People can not resist the rule of nature; and we suppose that 15 Castillero, 2!?.• cit. , 127

l6 Castillero, 12.£. cit. l? Ibid. , 128

18 Ib.d-2:._., 128 ll

by nature the Isthmus of Panama is called upon to be independent, and that this independence will already be1~ained, later or earlier, a century from now or ten years from now.

The most ponderous and necessary task 1as to lay the foundation for the ne government in whose labors all participants were inexpert.

The revolutionary junta, doubtless consciou of their grave reaponsi- bility, approved without reservation, and without consulting public opinion, by means of executive decree No . 24 of December 2, 1903, a hasty document, Treaty of the Canal, and permitted it to be signed by the United States negotiator during the process of forming the new government. 20

In order to give the organization a stable deJOC>cratic character, the provisional government called a popular election for a constitutional conventioa composed of 32 deputies, four for each of the six provinces and eight for Panama district, as the latter and an even greater popu- 21 lation than then tional capital. Deputies were selected from each of the historic parties: liberal and conservative. The convention melon January 15, 1904 and the junta resigned its pov:ers to the nei. government. It was composed of·outstanding figures of the Isthmus, many of whom were personalities whose patriotic services in Pana.ma public life contributed meritoriously to the nation and had been driving forces in its progress. 22 The national assembly delayed consideration and discussion of the

19 Ibid. , 128

20 Ibid .. , 168

21 ~ - , 168 22 llig_., 169 12

"Great Charter of the Nation fl witil February 13, at which time the f'unda- mental law was definitely approved and signed by the legisl tors. The goveznment and its cabinet sanctioned it to days later. The convention then proceeded to elect the first constitutional President of th country, a designation which fell, as a tribute for his efforts toward the creation of a republic, to ' uel Amador Guerrero. On F bruary 20,, 1904, in a solemn ceremony, the national executive swore to uphold the new government . Thus ended the revolutionary goveinment initiated November 3, l OJ, and Panama entered upon a road to legal form. The public powers were divided into three clearly defined branches, whose functions were limited, much as in the Unit d States, to the legis- l ative, executive and judicial departments. The national assembly, elected by the people every four years, meets annualiy in ordinary sessions beginning September 1, in order to levy tax.es, approve treaties and legislate on all national problems.

The resident is assisted by six Secretaries, freely named and removed, who are chiefs of the six branches into which public adminintration is divided: State, Justice, Foreign Relations, Treasury, Health and Public ·orks, Agriculture, and Commerce. all personal national administration, with the exception of the assembly, was reserved for the resident or the chiefs of depen ent offices. The President ·s also in charge of nat .1.ona. 1 poli ey. 23

The judiciary is exercised by a Supreme Court of Justice, Superior

Tribunals of Judicial Districts, of which there are two, and Judges of circuits and municipalities. 24

23 Ibid., 171

24. Ibid.. , 171 13

The Supreme Court is composed of five .magistrates named by the

President for a term. of ten years, each President naming two magistrates.

The magistrates of the Superior Court hold office six years, the muni­ cipal and circuit court judges each for four years. In special cases the national assembly exercises the functions of a judicial tribunal. 25

25 Castillero, loc. ill•,. 14

PAN •s RECEPTIO INTO THE V'ORLD OF N TIONS Chapter II

The news of the birth of a new nation eaused an international re- acti n. The action was a significant step, and its announcement came as no secret to voices of the French and American press and to diplomats who had followed the internal affairs of Colombia. In the dailies of Paris, ew York, Panama, and some points of Colombia, the declaration was announced to partisans of the Canal. Apparently the only ones to whom the news came as a surprise were the Colombian authorities of Bogota. 1

The first nation to extend the hand of friendship was the United States. On November 5, the American Consul sent to the Secretary of State the following information: n official circular was received from the Provisional Gov.ern­ mont in which it was stated that an independence movement occurred on the fourth and that the Department of Panama was separated from Colombia and the Republic of Panama was formed. I was asked to advise receipt of the circular. 2 To the foregoing notice to Washington, the Secretary of State replied on the sixth, with authorization to enter into relations with the new government of Panama: You will enter into relati-ons iith Panama as a responsible territory, and will solicit from it all necessary aid for protecting the perso sand property of the United States and for maintaining open transit of the Isthmus in accord with the obligations which treaties Yith the United States impose upon it 'ithin its territory.3

1 Castillero, History 2f Inter ceanic Conmunications ~ 2f its Influence !:!!2, 2.£ !:h2, Development 21 Panama Nationality., p. 151

2 Ibid. , p . 152 J Ibid. , p. 152 A clear duty was imposed upon the President of the United States.

In the interests of the Isthmus, the people of Colombia, the United

States, and the trade of the world, and in order to conserve for all free transit through the Isthmus, a power was needed to establish per­ manent peace. 4 As legal justification for recognition of the new republic, and contrary, consequently, to the friendliness of Colombia, President Roose- velt explained his conduct in a message to Congress:

In the opinion of eminent authorities on treaties the Isthmus was dedicated for the purpose of an inter-oceanic canal under the Treaty of 1846. Colombia could not, under existing conditions, . decline to enter with the United States in adequate arrangements for this end, without violating the spirit and the obligations of the treaty whose benefits she had enjoyed for more than 100 years. My intention was to consult Congress if in such circumstances it would be appropriate to announce that the Canal would be opened in:mediately. We ourselves authorized the conditions offered; and if such conditions were not agreed to, we would have entered directly, or taken any means necessary to begin the enterprise. 5 As soon as a diplomatic agent was selected, Panama was recognized by the United States, and the first powers of Europe and Asia hastened to manifest friendship for Panama. From South America the f irst nation to offer friendship was Peru. Th Foreign · nister of Chile gave Colombia a significant statement of its attitude toward Panama: "Although I lament the separation of Panama, I am happy this question is terminated peacefully and honorably. '' Chile did not enter into relations with Pana.ma until March, 1904, primarily because Chile was leagued ~ith Colombia by a moral debt con­ tracted in the Pan- American Conference of Mexico . 6

4 Ibid., 159 5 .f!?!s!., 160 b Ibid., 161 16

Argentina and Ecuador gave Panama · ediate recognition. Ecuador capitalized on Colombian sentiments of nationality in a letter from

Governor Garcia wishing Panama to assume international relations . Pres- ident Castro of Venezuela was friendly toward Panama: The Congress of Venezuela salutes the banner of the new Republic, constituted through the will of the sons of the Isthmus. Panama is a legal personality, recognized by almost all o the Cabinets of rope and rica; it is natural that Venezuela equally recognize Panama's independence as an accomplished fact and rejoice that it mar truce its proper place in the political history of Hispanic- America. '/ The offer of recognition by England presented an odd condition.

The British representative in Washington obligated Pc>.nama to pay part of the debt contracted by Colombia because of funds loaned to that Con- federation in the epoch of independence and to which the nister of

Pana.ma, Bunau-Varilla, in Washington was pledged on ovember 25, 1903r On November 26, the British · nister in Washington ma.de recognition of Panama . Six months after British recognition of Panama the bond holders gathered in London to make the following resolution: Resolved: that the General Reunion of bondholders, in conceni over the foreign debt of the Republic of Colombia, state their right to expect Panama to assume a just and equitable part of the sum, which this government will receive from the United States through a concession at the opening of the Canal. 8

President Roosevelt, without conaulting Panama, said that Panama would pay part of the debt. Panama rejected such an understanding until Colombia could be considered, as well as anama•s inco e and related factors b.eginning with independence. The British debt dated back to

1821-1822.

7 Ibid., 164 8 ~TI:,.~d ·, 165 17

General Uribe published a pamphlet in Buenos Aires criticizing United States intervention in Panama in 1903. The Colombian delegates at the Pan-American Conference at Buenos res in 1906, asserted that the presence of the delegates from Panama did not signify that Colombia could or would recognize Panama as an independent nation; notwithstanding conV,entions nd treaties participated in by ~anama.9

Panama's independence had been inspired probably above all by the glories of Bolivar, who contributed to strengthening the freedom and development of America. Bolivar had predicted almost 100 years ago that

Panama would become independent, and had stated his hope in a prophetic reaction: It is not possible to express the enjoyment and admiration I have experienced in knowing that Panama, the center of the universe, was regenerated by itself and freed by its own virtue. The act of independence of Panama is the most glorious monument which can be offered to ~he history of any province of Ameriea1 All is there: justice, generosity, policy and national interests. O.

9 .!2!.£!., 166

10rbid., 19 18

AN INT · PREI'ATION OF UNITED STATES INTERVENTION IN THE REVOLT, AND THE VALUES DERIVED THEREB:Y j Chapter III <

Would the ~ashington government have interwened in the Isthmus had there not been an acquiescence on the part of Panama? Autonomous people must consent. Here we shall try to pro~e that the small republic did require the power of the United States to aid in its secession, but that there is no implication that Panama was subjugated to the more powerful northern nation, and existed as an entity t ough both its fortunate geographic composition and a spirit of unalloyed nationalism. Dr. Jose D. Moscote says:

Panama., as the most youthful of the republics, is noted for having followed a single constitution during its 36 years of inde­ pendence. Modeled after that of the United States, the constitution, as ell as the declaration of independence, was probably drafted in the New York office of William Nelson Cromwell, an astute lawyer of the French Company of the Panama Canal and was taken by Dr. Manuel Amador Guerrera when he left New York on October 20, 1903 for Colon., in order to aid the s11.°ntaneous ~prising of the people of the Isthmus on November 3, 1903. Dr. Testa says that the above is erroneous., that the plan was arr- anged in the offices of "Doctors Villalaz Samuel Lewis., Carlos A. Men­ doza and Dr. Nicanor Villalaz, in Panama. Neither is the Panama Consti- tution modeled after that of the United States, but after the Colombian

Constitution of 1886. 11 2

1 The manner in which the government of the United States, under President Theodore Roosevelt., hindered the oppression of the State of Colombia,. and inmediate4' recognized the new republic, might appear as an indication of imperialism. However, from an international viewpoint, it is gratifying to know that a partial recognition of the injury done Colombia was finally realized by the ratification of a treaty on April 20, 1921, by the Senate of the United States., granting payment of &25.,000J,000 to Colombia. 2 Benito Reyes, Testa Combatiendo la Fabula Remembranzas del 3 de Noviembre., Panama R. de P. , (1943) p. 16 19

This divergence is explicable; the idiosyncrasies of t ho people of

Panama, marked by the wprinciples and custo s of the other people of

America, which were both Spanish and North American, required a consti­ tution in consonance with such customs and principles. 11 J

Statements published on the Panamanian revolt frequently err, in t e author's opinion, on the subject of the United States• intervention. A characteristic sample is offered by Ramon Sopena, who states in the fol­ lowing paragraph alluding to the Republic of Pana.ma: Panama, as was often the case with the other republics of Spanish

America, a~er various vicissitudes and upheavals, final.13 separated from Colombia, with the aid of North America, in 1903. 4

The preceding note is inspired by malice, as the reader will easily understand. It tends to disregard the work of the revolutionaries en­ tirely. Had the Isthmus been separated from Colombia by North Ame rica, as is here asserted, what then, would ha e been the indispensable action ot the Panama patriots, Accordingly what must be believed of the act of secession, is that the manifesto of the provisional junto of the government ., the "data of history" gathered by don Jose ugustin Arango, and all other texts of the country, illustrate that the chiefs of the movement agreed to sepa.ra- tion after having carried out reflective deliberations, planned for means of a happy termination, and decided to execute the operation., believing that it was the wish of Panama in taking up arms for the realization of 5 their goal.

3 Reyes, 12.£• ill• 4 Ramon Sopena, Geogra.fia Pintoresca (1930), 404

5 Reyes, 2£• ill•, 5 20

I~ it hardly imaginable that if the people of Panama had not desired

that separation, they ould ha~e been able to carry out the latter in

conformity with what history details in official correspondence and anno-

tated documents~ :,ould the government of Theodore Roosevelt have been

able to venture the execution of the spoilation---as there is no other

thing which would have been equivalent to this act? It is doubtful.

Further, ould the other countries of the globe have been indifferent to the event had it been a purely imperialist act? 6 The following is to be found in the !!!!'! Standard Encyclopce dia:

"Panama has neither army nor navy. It is under the protection of the United States. Its policy is headed by American officials. " 7

In this respect, the following clarification is necessary: According to the first treaty of the Canal, the Canal remained pro- tected throu h coutr~ct· with the United States government , by which the

United States will impede any attempt to disturb the free functioning of

the new republic. It is therefore unnecessary for Panama to be armed, even foolish, in this day . But when it is stated that Panama policy is headed by American officials a lamentable error has been incurred. A

Mr . Lamb was secured from the United St ates to study engineering, mining, and customs laws, but this in no way impaired the sovereignty of Panama.

Mr . Lamb's duties w re those of a consultant and were carried out with dignity and prudence. 8 Further documentation reveals an illuminating question and answer:

11 as the United States responsible for the separation of Panama

6 Edited in Chicago (1936), Vol. 7

7 Reyes, 2£• ill• , 7 - 1,• • • \ . ,, 8 ~ . , 7- 8 21 from Colombia?'' This matter has been discussed very much. It is certain the United

States did nothing to prevent it. President Roosevelt is quoted as .re- plying as follows:

I took the Zone of the Canal, is perhaps the best reply. Panama was converted into a protectorate. The strip of land ten miles ide, called the Zone of the Canal, has come under the custody of the Marines and the Yankee Army. 9

In ord.er to avoid any misconstruction on the part of the reader it is necessary to make it clear how international law regards territory submitted to the condition of a protectorate, and ·what the systen of government is which governs it.

A protectorate in general consists in a "country submitting to the protection of another. 11 The sovereignty a state exercises in the terri- tory of another--that has not been fully incorporated into the nation--

--is equal with the authority of the autonomous people. The protectorate is territory in which is exercised that shared authority. lO

From these definitions and the foregoing arguments and docwnentation it should be clear that the revolt in Panama was not so much an imperialist gesture on the part of the United States as it was an incident forming fortunate by- products for both Panama and its protector. hatever inter- est and aid the United States displayed in the Panamanian revolt was amply repaid in due course. Assured of the rights considered necessary for commencing work on the Canal, together with the buildings, materials, and French plans a.11d

9 Faulkner, Kepner, and Bartlett, "Life of the eople of North America, 11 p. 322

10aeyes, 2.e• ,m., 10 22 studies, the United States immediately took possession of the canal con- struction and in ay, 1904, initiated work toward completing the task. 59,747a493 cubic meters had been re.mo'lred by the French at a cost of

$25 ,000,000. This excavation was utilized by the Americans in hopes of more rapidly tenr.inating this gigantic work. l!ore mo ern machinery was employed, along with some 45,000 laborers. 11

The efforts of the Americans, and especially those of the engineer,

Colonel George Washington Goethals, completed the Canal by Septamber, 1913, at a cost of $937,000,000. 12 During the construction of the Canal 22.,000 died during the French period of construction and 6,283 more during the American operation, a great human as well as financial cost.

The great merchants of both the United States and of the orld re- ceiv,ed major b..enefits from this route. It shortened the road to Europe,

Asia, and the uri.,,nt. .Australia today is closer to the old world via the Panama route than by the Suez Canal. 13 / A ship sailing from New York to any Pacific port, through the Straits of Magellan, only entered the waters of the acific after running 6890 miles; today, by taking the Panama route, the run to the Pacific is scarcely 1930 miles. Sydney, Australia, a distance of 11,200 miles from Plymouth via Suez, by Panama is closer by almost 2000 miles; and Welling- ton, in rew Zealand, through t'anama, is 2000 miles nearer New York than by any other route. The Canal has also placed the countries of Meridianal America considerably closer to the great American centers of production

11 Castillero, !!!! Panama Canal, Key ~ 1:h!:. Pacific- lli Political ~ Commercial Importance, pp. 17~175.

12 ~ - , 180 <•

U _,Ibid. 181 23 in the East as well as to the western markets of California~ Oregon and Alaska. 14 /I

Professor Kaufmann says:

Given the nature and situation of the Panama Isthmus, the int­ erests of world commerce and or international relations of all peoples are now so much more intimately linked that whatever may be the changi in Panama's political sovereignty the conviction will remain secure. " 3

Above all, North American trade makes the Canal a source of economic value. Basterra said: The United States gains much . That powerful nation, with its inmense production, is placed in a position to inundate the markets of the world. Its minerals and technological supremacy produce cheap­ er products than those of Europe. Iron, oil, and the many elements of prime necessity, with the great fall in prices which will f ollow the opening of the Canal, can be placed to an advantage in the mar­ kets of South America, Australia, China, etc. Above aJ.l, the advan­ tages the United States will find in Latin America are abundant. Filled with agriculture and mineral resources as yet unexploited because of poor internal communications and railroads, the South American market is ripe to receive through the new Canal at relativel.y low prices locomotives, wagons, and vital ~chinery which North American factories turn out in abundance. J.:> J From the opening of tha Canal in 1914 up to 1935 the Canal produced $449,000,,000 in income for Pana.ma and made it more possible to secure the protection of the United States by union of the Atlantic and Pacifi~ 16 fleets. fl George Dern rendered to President Roosevelt a significant statement:

Among the most salient events of the last fiscal year is figured the rapid transit through the Canal by the fleet of the United States. During the first hours of the morning of April 23, 1934, 110 ships of the fleet undertook the transit of the Canal .from the Pacific to the Atlantic. Continuous operation, day and night, with flood gates at full capacity, reduc d the operation to approximately 48 hours and demonstrates the potential value of the Canal to our national

14 ~., 182 15 ~.. , 184 16 Mg., 184 defense. The return voyage, of about 90 ships, through the Canal, from the Atlantic to the Pacific made on the 24th and 25th of October, required 41 hours, indicating a high degree of efficiency, not only of the personnel but of the fleet as well. 17 I The Isthmus benefitted immediately when the Canal went into construction. The social situation of the Isthmus, in the epoch of the secession, had amply justified the decision of the inhabitants. The picture which Panama presented could not have been more disconsolatre. aro said:

Poverty, in truth, was our perspective when we came into the international world at the beginning of this century. A scarce population, scattered communications lacking ease and rapidity; illiteracy, an impoverished people, stagnant commerce, destroyed industries, uncultivated fields, languishing primary and secondary education and squalor honeycombed the country. The pro­ fessions were non- existent; without bridges, roads, schools, public buildings, or urban facilities, with norms of life far unde what w desired--the Isthmus was a disconsolate state in 1903 • .__

For the Isthmus, undoubtedly, ·n~ndence was imposed by ne­ cessity, and without the determina · to revolt would have b.een no Canal, upon which hinges the ec omic · e of the Nation. 18

The income of the Republic in 1903 was $1,107,000. Today it passes two billions. The volume of commerce multiplied; consequently a general well- b:eing is enjoyed. Of the millions of dollars expended on labor, a great part remained in Panama increasing private fortunes and swel.ling the income of the nation, which was greater,. thanks to the development of commerce, than ever before, with the possible exception of the time of the Fairs of Portobelo in the 17th Century, and the construction of the railroad during the nineteenth century. The Canal, through the Treaty of

1903, paid the Republic of Panama $4.30.,,000,000 annually and the Panama

l7 ~ - , 184

18 ~ - , 185 25

Government received $10,000,000 as the base of financial organization. 19

The rapid progress of the Isthmus, after its emancipation, in in- creased riches and development of finance, land value, popular culture, diffusion of health, expanded communications, increased industry---all of which is the result of the change in regim.e---was made possible by the construction of the Canal, and justified the pitiful but necessary .20 step taken by Panama on Noumber 3, 1903. The world is obligated to Panama for making possible the termination-

~ which appeared definitely suspended by Col ombia's negative decision--

--of that still stupendous cor.struction which is a monument to human intelligence. The same Colombia which put obstacles in the way of the work is now in a condition to enjoy major benefits from it. A noted historian, Dr. Eduardo Posada has stated:

The Canal is, far from an evil, a great benefit to Colombia. It is not a debt for which we should collect indemnity for damages and injuries. It is an instrument which will bring Colombia a cur­ rent of gold which in return will bring imnense prosperity. 21 Under the influence of the Panama route, the ports or both Colom- bian coasts have unfolded a considerable prosperity in an active and intense trade. At the same time it increases the production of Panama, bringing foreign capital with which to develop its internal resources. It was an evil of excessive patriotism to deprive the world of the benefits of an international canal. 22 General Rafail Reyes, a Colombian statesman, and ex- resident of

19 ~ - , 185 20 ~ . , 186

21 ~ - , 186 2.2 Ibid. , 186 26

Colombia, upon visiting the Isthmus and admiring the prodigious work, foresaw with singular clarity the continental influence which Panama was called upon to exercise in this hemisphere.

"The Panama Canal, 11 said he, r1apparently was finally constructed in order to bring all the peoples of the New World together, that in this manner it might fonn and strengthen the soul of America. 11 23

The Canal undoubtedly aided in bringing about the Bolivarian ideal, and Panama has been the center of the spiritual junction which makes r ttthe sons of all of the Americas simply citizens of America. " 24

2J .ill!!· , 187 24 filg. , 186 27

THE TREATY OF 1903 Chapter IV

The Panama p«>ple saw a threat in the acceptance of the Treaty of .

1903 in all of its parts, although this aspiration to freedom led them to have faith in their .fastidious negotiator, Bunau-Varilla, and in the l treaty signed by John Hay.

Some public discontent was caused in Panama by the delegates who were negotiating this contract in the United States. B'ut Dr . Manuel Amador

Guerrero and don Federico Boyd made it known that it was impossible for the United States to do anything further than promise to convene other discussions which might diminish the drastic terms and the newly born nation decided t o contract itself with its powerful friend and guarantor. 2

The idea, then, of having in the Treaty the r eforms necessary to embody a spirit of quity for the Republic of Panama, was born in the same moment in which that important document was introduced to the Pana- manians. Immediately Panama 's diplomats began to seek a new meeting for the revision of what had been signed.

Don Federico Boyd said: The unauthorized signature of Bunau- Varilla, in the represen­ tation of Panama was hardly signed on the Treaty of slavery before he pretended to open new negotiations over certain points with the Department of State. These points were of such slight nature as this: 11 The Island of Manzanillo will continue to belong to the rail­ road company. " 3

1 The Triwnph 2!_ Pana.ma Di plomacy (Review of the Treaty of 1903) , 189; also Monthly Bulletin, Vol. XIV , American Republics Bureau, pp. 356-368, 51.3-526. 2 TI!! Triumph of Panama Diplomacy, 189 • .3 Don Federico Boyd, Libro Panama. 28

Dr. Manuel Amador Guerrero indicated to r. Hay, U. s. Secretary of State, the necessity of making an imnediate revision of the Treaty. He presented as one of the questions to be discussed• an indemnification to the railroad of 250.000 Bolivars, which should be paid independent of the .annual compensation which the Treaty of 1903 contained. Mr . Hay made dubious promises which aided in postponing action on Panama's aspirations for more than thirty years, as will be seen in the course of this relationship. 4

The first formal affirmation which w s made before the Department of

State in Washington in correspondence sent by don Jose Domingo de Obaldia on August ll, 1904: 5

This notice, in which were analyzed the unjust principles contained in the Hay- Bunau- Varilla Treaty, served as a base for diplomatic action by Panama in obtaining a fair revision of the Treaty of 1903. On hearing the reasonable claims of the Isthmus, President T. Roose- velt commissioned his Secretary of ar, illiam Howard Taft, in a letter of October 18, 1904, to go to the Isthmus and confer with President Ama- dor. His instructions werei that it is not the purpose of the United St ates to extract ad­ vantages from the terms %f the treaty which concede for intervention in the State of Panama. Appar ently, it was feared that there ould be established an independent community and a competitor which would injure Panama •s comnerce, reduce its income and diminish its prestige as a nation. 7

We affirm emphatical.ly that we do not have the least intention of establishing an independent colony in the center of the Republic of Panama, nor of exercising major functions of government which may not be necessary for permitting us conveniently and ith security

4 :!'..h! Triwnph of Panama Diplomacy, 190 5 Ibid., 190 6- Ibi d. , 190 7 ills!•, 191 29

to construct, maintain and exploi t the Canal in accord with the rights which the Treaty concedes us, and much less do we desire ho interfere with the commerce and prosperity of the people of Panama.

As a result of the foregoing recommendations of the resident of the

North erican nation~ Secretary Taft, after conferring at length with Panama authorities, made an executive order dated in Panama through De- cember 3rd to 6th of 1904. Those provisions which were deplored by Pres- ident Amador ere qualified by the Taft Convention. This convention was followed by other executive orders expedited in ',ashington on December 9 28, 1904 and January 7, 1905 . The policy of the Theodore Roosevelt administration with relation to Panama was faithfully translated for the Panama nation in the declara- tion Secretary Taft made at a reception in his honor in Panama: The government of the United States here states it has no in­ tention of forcing itself on the Isthmus , of doing anything except constructing the Canal which unites the two oceans and thus brings great benefits not only to this country, but the United States and humanity. The United States has no desire to exercise more power than is necessary in accord with the Tr eaty, for securing the con­ struction, maintenance and protection of the Canal. 10

The American historian, "il.lis Fletcher Johnson, who had a part in the Taft Convention, ref erred to the discussions at the reception and received a considerable ovation when at the very beginning of his dis-

course he said: "There had been no justice to the people and to the coun- try of Panama in the earlier treaty," and further stated he believed

"The negotiations had arrived at a point where all had reason to expect a solution of the difficulties honorable to both countries. 11 11

8 Ibid. , 191

9 ~ •• 192 lOibid~, 192 11Ibid. , 193 30

The duration of the modus vivendi established in the Taft Convention, which notably accelerated the economy of the Panama Republic through the guarantees authoriz.ed for the exercise of co.nmerce, was for only 20 years.

The end of this period was July l, 1924; at this time, unfortunately, a new modus operandi highly damaging to Panama's interests was initiated. On January 4, 1924, Panama's Minister in the .United States, Dr. Ricardo J . Alfaro, presented the American Secretary of State an extensive aide- memoire in which he explained the more difficult terms of the Treaty of 1903 . The document expressed hope for a plan for greater cordiality, and justice, between the two coW1tries, based on three fundamental pro- visions for future negotiations. These were:

1. That the Canal Zone be occupied and controlled exclusively for the purpose of maintaining its own security, and that the Zone be opened to the commerce of the world as an independent colony. 2. That the Republic of anama remain in a position to secure the proper develop.i~ent of the commercial advantages inherent in the geographic situation of its territory without disturbing in any manner either the functioning and exploitation of the Canal Zone by the United 3tates or its complete jurisdiction, policies and administration over the Zone. J. That the stipulations of the new pact be inspired in such a manner as neither to injure the prosperity of Panama by reducing the income of the government; nor to diminish its prestige as a na­ tion. For the ensuing diplomatic maneuvers the two countries named res- pective plenipotentiaries to discuss the problem. Ricardo J. Alfaro, Ensetio a Morales and Eduardo Chiari represented anama and Charles E.

Hughes, the United States. The first session was called on March 17, 1924, and the discussions ended July 27, 1926, at which time definite terms were agreed upon for a new treaty. However, the people of Panama, upon presentation of the proposed revisions to the National Assembly for approval, rebelled and pressed 31 the legislature to deny acceptance.

Under this formidable sanction of the citizens, the Panama Assembly repudiated the pact in January, 1927, employing in its refusal quite courteous arguments, but definitely declaring its suspension. The re­ solution was approved unanimously. 12

Panama believed that since it had not been permitted regulation of its trade, there should be a revision of the Treaty of 1903 which it was felt, violated the principles of mutual advantage. Panama also believed, from declarations of United States statesmen, that the latter country was interested only in protecting the Canal and did not care to inter- fere in the business life of Panama. The chiefs of the t wo nations later agreed to the abowe general principles. 13 President Arias presented that view at the ,. ntevideo Conference of 1933. Dr . Arosemena argues that

Articles 1 and 7 of the Treaty of 1903, which authorized United States intervention in Isthmus affairs, were considered as a deprivation of national dignity and were offensive to the people of Panama. 14 're satisfactory arrangements discussed between Cordell Hull and

Sumner Welles and the Panama foreign relations secretaries were subse- quently written into the Treaty of 1936, which deleted the obnoxious provisions. This treaty marked a milestone for Panama's development, as it delineated the end of a unilateral interpretation of the Treaty of 1903 . Three facts were outstanding in the new treaty: 1. A basis for understanding again was reached between the two

12. ~ I,t:i uropb 2.! Panama Diplomacy, 196 l3 Ibid., 198-9 14 Ibid. ,. 199 32

nations.

2. The Republic of Panama became an absolutely independent republic,

with the United States no longer able to intervene in the intern .1

or external affairs of the Republic, as had been authorized by

Article 7 of the Treaty of 1903. 3. Panama's concept of the area of the Canal Zone as territory of the Republic of Panama, under the jurisdictivn of the United States, was confirmed. In 1939 the United States Senate signed the Treaty according to which Panama acquired and exercised integral independence without limitations nor fear of restrictions of its sovereignty and liberty. A complete national personality had finally developed. 15 33

PANAMA IN iIDRID t~AR II

Chapter V

The national assembly, in a petition to the executive power as an interpretation of the sentiment of the people of Panama, took an import- ant step in Panama ' s history, placing the Republic in a post of honor during orld ar l! on the side of the United Nations in defense of the 1 survival of 1i rty, dignity and justice, against violent f orce. Panama entered the war without clamor, without loss of a sense of proportion and with CQJllprehension from. the beginning of the limitati ons of mat erial contribution in which it could add to this vital enter prise. Panama's contribution to the Allied cause has, first, the signi- ficance of securing active cooperation and the highest efficacy of this nation in whose territory lies the key to the inter-oceanic route which has proved to be a major segment of the defense of the American contin- ent. 2 The importance of position, as in the often belligerent game of chess, is illustrated by the Panama Canal. Just as North Africa was a base for supplies to the Allied Armies in Europe, the Panama Canal was of value in defense as well as a boon to international trade.

This maritime artery was protected by admirable wartime defenses which were without doubt of the first order. It is well known that a highly complicated net of defensive anti- aircraft batteries, emergency airports, detectors and alarm stations could not, in a war such as the last one , be circumscribed by the small area which the Canal Zone occupies.

l Panama S cretary of Propaganda, Accion Democratica Internacional Tres Fechas ( anama R. de P. , 1943), p. 38.

2 ~ - , 38. 34

The defense airdromes guaranteed the entrance of the canal, the alert stations and alarm stations and the distant batteries could have re­ pelled attacks before they could have acquired a fatal proximity to th

Canal. All this as envisioned and aided in a territory under the full jurisdiction of the Republic of Panama, which facilitated the establish­ ment of defenses so vital for the security of the continent. 3

And it must be remembered that not only cannons, fjhips and air ships are means of repulsing an enemy attack. The powerful aid which an al­ liance of good faith and collaboration without reserve can render are not insignificant in a war so full of unsuspected dangers as was ,orld var II. The war of today, through its vast potential of destructive means , permits even the smallest digit to convert itself into a great menace.

A spy uncontrolled, a saboteur, unwatched through any negligence or stumbling on the part of the repressive authorities, is perhaps himself as dangerous as an explosive mine of tremendous devastation. Legend t ells that the Battle of Waterloo was decided by an humb.le riastor, who indicated a secret route to the English arzD¥ at a decisive moment , and, whether the legend is authentic or not, it is obvious that if such could happen in those times, today the potentialities of s all nations have been multiplied on - hundred fold when destiny places them in the stra­ tegic focus of great actions. It is clear that Pan~ decided with fervor to place its destiny on the side of the democratic alliance. It could not have existed had it not been for the goverrunent•s faith in the principles of democracy and for the Panamanians' profound respect for the nations to whom they

3 ~ - , 39 35 offered their unqualified aid.

These purposes, defined in the Atlantic Charter and guaranteed by a line of conduct which gives faith to the postulates of the charter, inci- cated to Panama that the side of the United Nations was sincere in aasur- ing civilized man a free and worthy life, inasmuch as on the adverse side there was extreme violence, intransigence, oppression and the attempt to force independent people into the chains of slavery. 4 Panama's faith also had root in the honest conviction that once the United Nations subjugated the international danger the fruits of victory would not end with a triumphant war bulletin as a reward of sacrifice, but that they would aid in the ordering of a better world, where the just distribution of basic essentials are guaranteed for all men, where the abolition of all imperialistic norms, economic or political, lay the foundation for a lasting, universal and firm peace. Panama could find no better proof of that faith in justice which the United St ates represents than the proclamation and practice of the Good

Neighbor policy, whose optimistic fruits 1n most of Latin America are today the best proof of American solidarity. 5 That policy, whose author and most authoritative standard bearer marched at the head of the forces of war, aided in freeing the seas and the continents of the universe when the fortunes of contemporary civil­ ization were at stake. 6

4 illg,., 40 .

5> Ibid. , 42. 6 ill,g,. , 41. authoritative summary of Panama 's part in the war and the in- equalities suffered before the war is revealed in an answer to Drew Pear- son's wartime charge that the United States as trying to buy the good will of Latin America by Dr . Ricardo J . lfaro: In my customary reading this morning of your interesting column, "Washington erry-Go-Round", 1 noticed reference you made to the diplomatic agreements between Panama and the United States, pending consideration in the United States Senate. You appear to be under the impression, transmitted without doubt to the great majority of your numerous readers, that by virtue of these agreements the United Stat es is filling the purse of the Re­ public of Panama with millions of dollars for some reason. Such n impression can have been due to a lack of information, and recog­ nizing a sense of equity, I esteem it opportune to present you with some of the facts and considerations.

At the end of your commenta.ry you said: "--and while these understandings defend themselves behind the Good Neighbor policy, the senators doubt if a good n:eighbor can he bought for $50,000,000. "

I should observe in the first place that by reason of recent agreements, money did not pass between the United States and Panama; and in the second place the United States had no intention of buyin&, nor had Panama any intention of sellin good will, and good neigh­ borliness for pecuniary compensations. The tvo nations have never discu.ssed the monetary basis of the Good .Neighbor policy• a policy bilaterally developed, manifest in the relations dth Panama wlth the United States for 8 years, when the present administration in a spirit of justice and real comprehension, arrived t the conclusion that Panama had received offense, and that the United States had conunit ted errors that should be rectified. The fruit of that con­ clusion was the pact signed Ji rch 2, 1936. Thirty-three years of frict'on, rancor and controversy had passed before the annulment of the treaty. An intelligent, real friendship followed, not b cause of any money passed from hand to hand, but because Panama was no longer treated without regard for its sovereignty and began to be resp cted as one of "the two nations which made the construction of the inter-oceanic Canal possible. n

In order to form a conscientious opinion of the equity of the recent understandings, it is necessary to ex.amine some antecedents. Doubtless, I could not, in the space of a letter, enumerate the multiple and varied aspects of the complex relations created by the construction of the Pana.ma Canal.

I shall be concrete on three points explained by you, as the principles of the agreement which are the object of consideration:

1. You said: "The treaty stipulated that Panama was given all 37

of the system of sewers, aqueducts, and sanitary plant con­ structed by the United States in the cities of Panama and Colon in order to eliminate the fear of Yellow Fever and malaria. 11 This sounds like pure charity, but it is no such thing. The sanitation systems of the cities of Panama and Colon were constructed by the Unit ed States because the health of North Americans who were forced to labor on the Isthmus was a pre- requisite to bringing to completion the great maritime highway in Panama. In Panama there were sewers, antiquated, certainly; but they existed. Yellow Fever was not a menace to the people of Panama because we were immune . Consequently, the Panamanians were not preoccupied with their own well- being but that of the North Americans who crossed the Isthmus. The country certainly benefited by the construction o! modern drains and of aqueducts; but it is obvious that the resultant benefits of these works were much greater for the United States than for Panama. This notwithstanding, the Treaty of 1903 stipulated that such works would be paid for by the people of Panama in the form of contribution of water collected by the United States during a period of 50 year s . Since 1905 the Panama Republic has been paying that contribution in conformity with a tariff three or four times higher than is generally the rule in the United States. Panama on repeated occasions has affirmed its belief that the Panama people have already paid a con­ tribution of water in excess of the cost of the aqueduct and dams . The accounts are controlled by the administra~ion of the Canal, and Panama has made claims against certaln parties whG have charge of them, but even now an examination has not been made and a system of joint accounts not been undertaken, in spite of repeated demands by Panama. It can be reasonably supposed that Panama has already paid for the Canal and dams, or at least that if there exists any balance in anyone's favor, it is more than compensated for by the benefits which the United States received from those works in the construction and functioning of the Canal.

2. You said also that the treaty "gives to Panama all of lands which are owned by the United States in the city of Colon, evaluated at $25 1 000,000. " The United States are not owners of the lands in the city of Colon. The lands which the United States retained by lease are not eval uated at 25 , 000,000. These have never been on the market. A discretionary value was given to them based on the lands which the United States purchased by virtue of t he contracts of arrangement , but this value is less than half of the sum expressed above. The lands of the city of Colon were originally uncultivated, belonging to the government of Colombia and their dominion passed to the Republic of Panama through the secession. By contrast, it was agreed between the Colombian government and the Panama Railroad Company to cede to the company the lease of these lands for a period of 99 years, to expire in 1966, the lands would turn to the full dominion of the government together with all of the goods of the railroad. Panama consequently was potentially proprietor of the .38 of the lands, but by the Hay-Bunau- Varilla Treaty, Panama renounced and handed to the United States its rights in conformity with the contract with the railroad company. As a consequ nee the United States would come to be proprietors of the lands in 1966, but they do not yet have title of dominion and really are passing back the reversionary rights which they obtained from Panama in 1903. In accord with the concession, the Republic has the right to receive from the company an annual amount of $250,000 in compensation for privileges and exemptions which had been authorized. Very well, then, this right passed to the United States and as a consequence, the annuity of 250,000 stipulated in the Treaty of 1903 as part compensation for the concession made for the construction of the Canal was entirely ficticious. The United States did not assume in reality a new charge. They have paid Panama exactly the same Panama had the right to receive from the Ra.ilroa

But this is not all. At that time the income from the lands of Colon and Panama produced a sum that exceeded four million dollars annually, so that the United States, as owner of the railroad, would not only receive figuratively the 250,000 due to Panama in conformity with the terms of the concession, but even took from the arrangement sufficient money to pay the annuity of the Canal. reover, the wealth of the railroad, that in conformity with the contract would revert to Panama in 1966, will remain the property of the United States.

And even this is not all. Joined with its rights in conformity with the railroad concessions, Panama. renounced and handed back also to the United States its Canal concession to the French Co ., i n conformity to which it should receive a participation in the entry fee of the Canal, which amounts to 8%. If such a method of compen­ sation had been .maintained---simi.lar to that which exists in respect to Suez Canal- Panama, would have received, from what the Canal traffic advanced, a normal figure, annually, of more than a million dollars. These facts tend to demonstrate that in treaties between Panama and the United States, the latter will never lose f i nancially if the arrangements over the last 39 years are considered. Perhaps the best appreciation of the Treaty of 1903 can be found in the words of the celebrated negotiator, Mr . John Hay, in a letter he sent to Senator Spooner in January, 1904: "You and I well know how many points there are in this treaty to which any patriotic Panamanian can object." 3. "The treaty cancels the debt of $2,500,000 which Panama received in a loan from the Ex.port-Import Banlc . 11 This is as an act of grace, but there is a justified motive for the cancellation. The loan of $2,500,000 was invested by Panama in improvement and enlargement of the road which led to the Zone of the Canal from Rio Halo where the United States has an aerial encamp­ ment of vital strategic importance. The military necessities of the 39

United States Army demanded this work and this roadbed became in fact a military highway. We think that it is unjust to haggle over the 2,500,000 employed in a strategic road on the Isthmus, in the presence of the millions spent in all parts of the world to defend the cause of liberty. There is another observation in the article that cannot be passed by lightly:

1tThe Senators who studied these agreements-, n you said,"­ - -observe that the treaty negotiated by Secretary of State John Hay, permits the United States to use the territory of Panama at any time for the defense of the Canal. 11

Panama has always rejected such interpretation and sustains that Article 23 of the Treaty of 1903, relating to the use of United States force for the defense of the Canal. lt is our opinion that though it authorized the establishment of fortifications, no mention of the territory of Pana.ma is made, and it obviously refers to the Zone of the Canal. Already this opinion has won out, in the light of Article 2 of the Treaty of 1936. On the other hand, the questions. of defense which affect th territory of anama will be governed by Article 10 of the pact last named . That stipulation has a base of cooperation and has in view precisely such accords as those recently effected. I affirm with all sincerity that Panama is cooperating decidedly in the hemispherical global defense, not only for reasons of contractual obligations, but primarily because the Panama people are absolutely identified with the United States in the struggle for the survival of democracy. Permit me to close with the observation that the United States has a history of very generous treaties with other nations. After the Boxer Rebellion, China recogni:a.ed an in­ demnity of $25,000,,000 and the United States renounced it and con­ secrated it to the education of Chinese students. Nothing was re­ paid to the United States in compensation for the blood and money contributed to winning the independence of a sister republic. Vic­ torious in the 1ar with Spain and in a position to take all the spoils of war, the United States, by the treaty of Paris, comprom­ ised by paying Spain 20,000,000 for the territories ceded her. In 1917 the United States paid Denmark $25,000,000 for the small Vir­ gin Isles. Panama received $10~000 •000 for the immensely valuable concession or the Canal and was forced to suffer an interpretation complet ly uni.lateral in application of the Treaty of 1903, and was deprived of a considerable portion of the benefits which it should have received by a ·more liberal interpretation or by more liberal terms. If the United States can be generous for those nations, they can very well now be just in their treaties with the nation which opened the road for establishing on its soil one of the major instru­ ments of th*! United States' .force as a great nation.

Times have changed. They have also cha.Il€ed the norms of inter­ national conduct. They changed equally the relations between Panama and the United States. Yesterday there were small nations who lived 40

at the mercy of a powerful neighbor. Today they are based on the conception of President Franklin D. Roosevelt of the t wo countries as being jointly concerned in the work of the Canal, both having the right to enjoy proportionately its benefits. This policy has made that magnanimity possible and illustrates the liberalism of that incomparable trinity of statesmen--Roosevelt, Hull, and t elles--it has borne its fruits. In the Republic of Panama the result of that policy is that the security created by the opening of the Panama Canal through the entrails or our country, has removed the Canal as a source of feGr and lack of confidence and converted it into a source of friendship, confidence and collaboration for victory. 7

7 Dr. Ricardo J . Alfaro, ex- President of the Republic of Panama, "The Agreements Between Pana.ma and the United Statesrt,, 1!, Estrella~ Panama (Dec. 10, 1942); taken from Biblioteca Nacional de Panama, 5-12. 41

In referring to the effects of the Second orld ~ar on Latin America and Panama Mr . Edwin C. ~ilson, the United States Ambassador to Panama, said in a lecture there: Without a doubt many factors can intervene. In the United States and England there is being formed a new social and industrial policy, a policy which more adequate]¥ recognizes the relation of conswnption to production. It is very possible that invest~ents of a social character as in highways and heavy industry, associated with a high standard of life, can be the base for the industrial expansion of the post-War era.

Certain organizations, such as the Brookings Institute and the Temporary National Economy Committee of the United States, not men­ tioning more, have gathered data on the character of the depression, its cause, and its remedies. If the information gained can be used for the general benefit, there will be less danger of a future de­ pression. One prediction we can make with certainty i s that the indus­ trial map of the world has suffered a profound change. robably the European continent will be of least importance in the future mrld scene. There hav·e been formed tv10 ne\ and vast industrial empires; one is Australia and the other is Brazil. If the war lasts long and is difficult to gain, the American hemisphere, as a principal provider of war material and of foods, will advance to certain pre­ eminence, and if industrial development becomes general through all of the hemisphere, as can well happen, the rhythm of the changes made in America and Australia will serve greatly to maintain the pros­ perity occasioned by the .'lar. If La.tin erica has a sustained in­ dustrial civilization, it will considerably elevate the standard of life of the great masses of the people, making for greater purchasing power and for the habits of consumption necessary to the maintenance of the new industrial life. The process of credits has once more commenced and opportunities for investment will be offered to capital to provide the articles of consumption. What will be the basis for the new development? It will be founded on recognized resources and predominant technical machinery and all of the industrial metals. Petroleum and alwninum for aero­ nautic industries can be as important as coal and iron in the new industrial map of the world. Can Latin America profit most by limit­ ing herself to being simply a provider of raw materials for other industrial systems? The producers of primary materials must sell in a world market of free competition, where uncontrolled production maintains prices at a small margin of profit, and they frequently are forced to sell at a loss. Industrial products can frequently be pro­ duced where the reduced number of producers makes possible compet­ ition and high prices can be maintained. The industrialization of Latin erica does not constitute any danger for the United States, because foreign commerce is based upon the acquisitive pover of the consumer in the same ay as is interior commerce . The elevation of 42

living standards must be attended by industrialization of the Latin American countries which will be their own best clients. v,/" ""' J.> -An '11-o is.....b.rin to ama.'l. Already -it- has brought a flo of credits for agricultural development and the con­ struction of highways as economic necessities of the present. e are witnessing in Panama a profound economic revolution in the con­ struction of a great highway and the encouragement to agriculture carried out by means of instruction and by extension of agricultural credits. The industrialization signifies a superior standard of production, a greater volume of consumption and a higher degree of specialization. Furthennore, all of this signifies a greater traffic through the Canal. Panama finds herself at the cross-roads of the world, in the geographical center of this hemisphere, a hemisphere stimulated by the forces of War, infinitively richer, more produc­ tive, more interdependent, under the impulse8or a new standard _of life which has come with industrialization. This almost prophetic speech is now being tested and to some ex- tent brought into reality at the present writing, as is shown by the stirrings of local industrialization through nearly all of South America.

s we shall soon show, a rapid upsurge in commerce is already evident throughout Panama, whose income is almost an index of the state of hemis- phere prosperity. / As a result of the Second . orld ear, the Republic of Panama , the , most youthful and the least populous of the twenty Republics of South

erica, experienced an economic activity without precedent. For the

United Nations the Canal acquired a unique strategic importance hich required, durine the first days of the War, construction within the zone of the Panama Canal, and in the adjacent areas, of engineering orks of defense evaluated in millions of Balboas. As an immediate consequence the income of the people of the area near the Canal increased eonsid- erably. The terminal cities of Panama and Colon experienced conditions similar to those in cities in the United States dedicated to war

8 Dr. stin Nelson., Professor of Econo · cs, The Second T orld Nar !!l.9..!:h!. Economy of Latin America (National University of Panama., 1942). 43

·)1, industries:- opportunities for employment, a corresponding advance in prices and wages , demand for enormous aroounts of consumptive goods, and a critical housing situation. The already exorbitant civil population of these cities was swelled by ev n re thousands of the 'litary, transported to the ,L Isthmus for the defense of the International Highway. e " The Panama Canal was opened to world traffic August 15, 1914. The economic activity of the Republic was bro ht into conformity, in great part, in the supply of articles and services to personnel demands; for the operation and defense of the Canal, and for the ships and individual in transit. Said articles and services took .many and varied forms, which cannot be totally measured in statistics. Such are: ork of Panamanians on projects of the Canal Zone; sale of articles and services to civilians, soldiers and marines stationed. on the Isthmus; and sale of articles to ships in transit and to the United States establishments ithin the Zone .

The volume of these activities can be appr ciated indirectly by statistical data in hich forty percent of the population of the Isthmus has been con- centrated in the area about the Canal in Panama and Colon and are employed in the Canal Zone . lO It ean be estimated that between 1941 and 1942 the payroll of the civil population of the Canal Zone rose to 5,000,000 Bal- boas monthly. ~t the beginning of 19.43., however, defense ork on the Canal ndedj the opportunities for employment in the Canal Zone commenced to declin • This fact as reflected inmediately in the volume of sales of articles and services by citizens of Panama and Colon. Notwithstanding, the general

9 Contraloria General de.!!. Republica Dirreccion General~~­ distica (Republica de Panama"Y'; p. 5. 10 !E!£! • ., 5. 44 economic activity continued on a satisfactory level during all of the year as pictured by the mot important economic indices, to wit: Importations, bank deposits in private banks, private construction, and consumption of electric energy rose fWcn higher above the high level of 1942/11 VJ.I~~,..,"~ f lY The foreign co merce of Panama has been characteri~ed for sometime 4i by a strong volume of imports while exports have been relatively small.

However, the importance of Panama as an import country has not re- ceived due attention. In 1943, for enm.ple, according to commerce re- ports of the United States, Panama absorbed more ex.ports from the United States than all of the other Central erican Republic combined. 12 In spite of the critical situation of maritim navigation, th high cost of transportation, and the reduced volume of obtain.able articles for ex.port to the United States, principal supplier of Panama, the i ports of the Republic aJOOunted to 40,267,592 Bolivars.

The strategic importance of Panama in the 1ar effort of the Con- tinent is, without a doubt, the cause of the preferred treatment it en- joyed in obtaining articles from the United States. However , the pro- gr of exports fr the United States, with its diminishing quota of merchandise, forced Panama to increase its ales in Latin America. Thus as imports proceeding from the United States totalled 81% in 1941, in 1942 they had gone down to 76% and in 1943 only represented 64'1, . gen- t ina, which in 1942 had accounted for only Z!., of the imports, contributed

8% in 1943. Merico, Colombia, Peru and Guatemala, in t,heir part, also showed a substantial increase in exports to Panama. Of the countries of

11 12!&·, 5.

12 ~ . , 8 (also D partment of Commerce, July 1, 1944). 45

Europe only Great Britain and Switzerland exported 'products in significant volume, Great Britain's exports increased 433,400 Bolivars over thel3 fieur e for 1942,

The imports of 1942 and 1943 sho ed only very light changes in the general character of imported merchandise. Imports of live animals in- creased from 359,132 Bolivars in 1942 to 676,192 Boiivars in 1943 or perhaps an 83%. 14 Food supplies also rose from 7,493;247 Bolivars in 1942 to 7,769,847 Bolivars, perhaps a 3. 7% increase. Alcoholic bever­ ages and gases went down from 2,415,605 Bolivars in 1942 to 2,040,603 Bolivars in 1943; this is a descent of 15%, ad crease in consumption due to limitations of quotas. On the other hand, very small change was registered during that period in the imports of the crude materials, semi-manufactured and manufactured products, which have always consti- tuted the nucleus of the imports of Panama. Whatever dollar increase there was was chiefly due to higher prices rather than greater quantities of imports. Imports of wood, cement and other construction materials descended to a very low level in 1942, while articl s of consumption, especially textile products, showed a substantial increase. The impor- tation of restricted products---critical production, in the language of war econoJl\Y~ such as automobiles and accessories, electrical equip- ment, iron and steel articles, machinery, etc • ., all of which had a strong importation in previous years, continued subject to an assigned program during 1943. 15

l.3 Ibid., 8. A silver coin and monetary unit of Venez_uela, equi­ valent at; p .193 U. s. money . l4 -Ibid, , 9. l5 Ibid. , 11. 46

The exports of Panama, on the other hand, continued to decrease in

1943; in normal years they arrived at 4,000,000 Bolivars; in 1943 it was less than half of that figure.

Cotton was mo re important than bananas; for example, representing ex.ports valued at 754,793 Bolivars, that is to ay, a fifth of the normal turnover. This descent reflects a suspension of v·rious ships on the high . border of the "banana route". The exports of caca as evalui.l.ted at

402,460 Bolivars in 1943, which signifies an increase of 146,122 Bolivars over the nonnal figure registered in 1942. Rubb rand fibers of abaea, both war materials, 1ere exported in significant volume in 1943. The cultivation of the first of these products registered such a notable increase, through the efforts of the program which the Rubber Reserve

Co . , acting for the United States government, that in 1943 Panama ex­ ported 310 metric tons of this product. The establishment in Cha.oguinola,

Boc~s del Toro, of a net plantation for extracting fiber of abaca simi­ larly stimulated production of this important fiber. The export of cacao was prohibited in 1943 as a consequence of protection conceded to local industries of derived products.

As in previous years, almost all ( 91%) Panamanian exports are des­ tined for the United States. l6

The industry and commerce of Pa.nru:r..a have dedicated the major part of the articles of supply to consumption by the residents of Panama. The volume of foreign trade above is the best index to the conditions of local business. The places of entertainment and recreation, for example , hich have been prorated for employment of a considerable num­ ber of persons in the terminal cities, reported a reduced volume of sales

16 ill£., 12. 47 in the last months of 1943. Some of these establishments were closed in

1944. The articles of conswnption, substantial food supplies, beer, liquors, shoes, clothing, soq., are the most important products of s all local in- dustries. These industries enjoyed a den,and ~ithout precedent during

1942 and 1943, their major difficulty being encountered in ob aining indispensable primary materials for manufacture. The production of alcohol went up to 1,324,000 litres in 1943, an increase of 253,000 litres over the production of 1942 . In 191+3, the production of sugar was 97,

JOO quintal s, l7 considerably over nonnal production of this industry.

The production of vegetable oils, products derived principally from copra and the cocos of San Blas, was estimated at ?00,000 kilos. 60,4CX> head of cattle were butchered, a figure affected by quotas fixed in Aug- ust 1943. The consumption of electrical energy of Panama and Colon continued above the level established in 1942. The city of Panama consumed 28, 18 950,000 kilowatt hours, 13% above the figure for 1942.

Efforts have also been made to increase the number and quality of livestock. Stock raising in Pa.~ama has for some years been the base for agricultural weal.th •••• •• but in spite of efforts w..ade, many food supplies have to be imported.

Since anama depends so much n imports, it has automatically re- fleeted the advance in world prices. Since Pearl Harbor the cost of living has increased notably •• • • three principal factors of expenditure

17 A hundredweight. A metric quintal is 100 kilograms. lS Contraloria General de~ Republica Dirreccion General~ Esta­ di stica (Republica de Panama). p. lJ •.-- 48

are: foods, wages, clothing. r 11 have advanced to inflationary levels,

although the government has attempted to maintain stationary prices, by

reducing imports on some basic articles.

/ The defense and maintenance of the Panama Canal are basic policies or the United States and the activity of the Canal fluctuates as new sources are opened in other geographic theatres. Millions of dollars

have been brought t o Panama for Yiages on the Isthmus and have maintained

a high level of economic activity in Panama for several years. It is

expected that 200,000,000 Bol ivars will he spent annually in Panama .

Yet a general reduction of economic activity t\t·~e.::.liCQ~~ With defense h,a'? b ee....; construction completed there .:will b&- a general decrease in trade and in­ V"I Ct s dustry and a return to more normal conditions. Une ployment V&lJ.. con-

stitut problem. ~ Panama looks hopefully to the future. Free ports will be opened to

fleets where the trade of the Orient and Europe can be re- exported to other

countries of the hemisphere . anama hopes that the Panama highway will

bring tourists. The country, meanwhile, develops its agriculture and small

industries, realizing that a higher standurd of life is the best guarantee

for the future. 20 / ~re-t;f"' The financial situation of the Republic dtH'i4:.g l.9~3-4) has been the

a similar manner, the obligations of the state have expanded in contri-

butions to human well- being and in finding more ef£icacia\iS means of ele- vatine the standard of life of the community.

19 Ibid. (August,, 1944), 13. 20 ~ . , 19 . 49

It now appears opportune to promote private enterprise in commerce and industry and t o attempt to open new horizons for the investment of capital, national as well as foreign, as is being done int e other Latin Amer ican countries. anama probably should take into account its incipient econotey", re- enforce itself by bringing capital from the outside and not follow a policy of severe restrictions which would undoubtedly be incon­ venient in a count ry so lacking in popu1ation and limited in r esources. 21

Permission for the investment of foreign capital in private enter- prises could perhaps be legislated, since local capital would be assured adequate participation not only in the formation of such enterprises but in its direction. Private capital is routinist in its election of in- vestments, and contributes little to the progress of national economy.

If this continues, there probably will be a radical tendency in the near future, perhaps with the state initiating some enterprises. In the crea- tion of the Banco~ Urbanizacion z Rehabilitacion an impor tant step has been taken in opportune intervention of the state when private activity shows itself reserved and apathetic. The present administration, however , has ma.de efforts in favor of private initiative and by that we observe that in the organization of the Bank it has foreseen the possibility that it can sell its properties. The receipts of the Bank today indicate, incidentally, that private investments would do well. 1'? Thus we have shown the development of Panama, taking into consid­ ,/ eration the $:OB?), economic, and political aspects. We have given both r t\ .\ -e. '-' u ,'\ "5 \ ..... < Vi " .... 0 s · ~tv~ob~~~ o~ !Tffl'f:'i'l'Wl!11"S"~5 which has existed concretely since :1:04~ t\.-. • '- \. "' ~ •

21 Informe 9.tl Contralor General de la Republica Vigencia Economica 12lt.l-ltlt {Republica de Panama), p. 1.

22 Ibid. , 1. 50 possibly since the discovery of the Istrunus of Panama. 1 e then come to the conclusion that Panama belongs to the world, that is, as long as the world is at peace, and to the nation that built it when she is at war. t 51

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Castillero, Juan. "History of Inter-Oceanic Co.llJ!lun.ications and of its Influence and of the Develop.rmnt of Panama Nationality. u (1~2), 151.

Castillero, Juan. "The Pana.ma. Canal, Key of the Pacific- Its Political and Co~rcial Importance, " 173.

Contraloria General~ la Republica Dirreecion General~ Estadistica (Republica d Pana.ma), 5.

Faulkner, Kepner, and Bartlett. ~ 2£. ~ People 2£. North Anerica (1936) , 322. .

In.fonne del Contralor General ~ la RepubJ j ca IDgePd..,!! Economica (R. de P., 1943-194h), 1. . · · Am9rican Republics Bureau. Monthly Bulletin, Volume XIV , 356-513 .

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Reyes, Benito. 11 Testa Combatiendo la Fabula Hemernbranzas del 3 de Noviembre0 (Pana.ma. R. de P., 1943) , 16. Silvia, Dr . Carlos Martinez. emorandum (Washington, D. c., 1901) . Sopena, Ramon . Geografia Pintoresca (1930) , 404. TYPIST: Thomas Reynolds